In the fall of 1975, Don and Barbara Thomas stood in front of the boarded-up store fronts, defunct pornographic supply center and sleazy bars that made up the west side of the 700 block of 8th Street SE and knew they were on to something big.

"We looked across the street at the trees, lawns and Commandant's House of the Marine Barracks, and it was as though we were looking at a street in Savannah or Charleston," Thomas said. Over on the side streets in both directions many homes had been remodeled, but this strip was sitting there in mid-dereliction. We figured it was a sleeper."

The sleeper was suffering the ill-effects of the 1968 rioting, looting and burning that took place on the three blocks along 8th that link Pennsylvania Avenue to the Southwest Freeway. It was a high-crime, drug-ridden area with raucous bars catering to a variety of clients.

The Thomas bought the store at number 721, renovated it and turned it into the elegant Ademas Tile Shop. Within a year they were joined by the Barracks Row Flea Market; El Mercado's, an interior design store; Pottery on the Hill, a crafts and pottery center; Bedpost Gallery; Ultra Plus and other antiques, home furnishing, home repair stores. Two restaurants are slated to move in this spring. Plant and Trowel, an antiques store from 11th Street, is relocating there, as are several new business. By the time the first annual 8th Street Fair comes off on June 5, the last of the boarded-up stores in the 700 block should be renovated and back in business!

Over on the 500 (there is no 600) and 400 blocks, the change is not as visually dramatic, but several of the more troublesome bars have moved out and businesses like the Plantemporium and Larry's Patio Cafe are evidence of new life on 8th Street.

The fact that a Metro stop on the corner of 8th and Pennsylvania is due to open in July is partly responsible for the new business blood, but the merchants who've invested in businesses on this still bordering strip are not leaving their future to Metro. Several new and old-time merchants have organized into the Barracks Row Association and set bushes in planters on the street, painted drab walls, cleaned up street trash and exerted influence on the kind of store that moves in and makes it on the row.

The Capital Hill Restoration Society, working with the District's Municipal Planning Office and Department of Transportation, has put together a plan, as yet unfunded, that would use brick sidewalk paving, new lighting standards and retrenched traffic patterns to tie 8th and 7th and Pennsylvania Avenue into one big happy shopping area.

When the new Metro station is complete, the entrance will be set in a park between D and Pennsylvania, 7th and 8th. South Carolina Avenue will no longer cut through, and an enlarged park area will be planted with trees, bushes, a grassy play area and will have benches for sunning. According to William Fauntroy Jr., an urban planner with Metro, the station, called Eastern Market, should carry 1,870 people out, 1,200 people in at morning peak hours in 1990. When it opens in July, it will connect 8th Street with Congressional office buildings, opening up the possibility of lunch time shoppers for the row.

Real estate prices, reflecting the coming Metro stop and the success of the newer stores, are increasing at a rate of 50 per cent a year in some cases. According to Capital Hill realtor Beau Bogan, a building in the 700 block that sold for $22,500 in 1968 sold, unimproved, for $95,000 in 1976.In 1975, number 516 sold for $125,000 and a year later for $200,000; the building at 524 sold for $58,000 in 1975; the owner fixed it up a bit and six months later sold it for $94,000.

"The prices suggest supply and demand is working here," said Bogan. "Let's face it, there's not much zoned commercial as compared to residential around here. There's a growing demand on the part of residents for shops and services."

The present push to bring 8th Street into line with the rest of prosperous Capital Hill is not the first. Bogan tried it 10 years ago. "All I got for my efforts was a tax write-off," he said. Spearheaded by the Barracks Row Association, marked by an unusual spirit of cooperation among merchants and between shopkeepers, residential tenants and landlords and aided by a subway stop this most recent effort appears to be turning 8th Street around.

Association members, Capital Hill residents, real estate agents - even the merchants leaving the street talk about 8th Street as the next Georgetown or Olde Towne Alexandria.

"Why not?" asked Barbara Thomas, who is credited with organizing the influential association. "The street has buildings that are architecturally interesting, wide sidewalks, nice shops - it's attractive to walk here now."

Eighth Street is not without an interesting early history. Developed in the early 1800s, it was for more than a century a smart, commercial boulevard. Harry Kroll of District Lock says that when he started his business on 8th Street in 1946, the street was "a medium-income business area. The Navy Yard was very active and around five o'clock in the evening the street was loaded with pedestrians. It was an active business street and there were many small business like myself. We did very well."

District Lock continued to do well even as the street and surrounding area deteriorated. "We never were dependent on residents for our trade - we have government contracts and real estate developers as customers," said Kroll.

Many of his business neighbors, however, left for other locations. The population on the side streets changed from middle-income homeowners to low-income renters. Sprawling public housing projects were put up and the nature of business on 8th Street changed. Kroll said the pendulum was swinging back.

"Over the last year business has gotten more residential here. A good deal of our trade is now with younger people who are fixing up homes on these side streets," he said.

The new businesses attracted to 8th Street cater, to a greater extent, to the renovating homeowner. It was the burgeoning concentration of such shops and services that drew El Mercado's of 7th Street near the Eastern Market to 727 1/2 8th St.

"We thought 8th was a more stable street for us and would be better for our kind of business," said Bill Boyd, a co-owner of the store. "Parking is better here. We have been on 7th for nine years, but we thought we had greater potential to expand if we moved over to 8th."

Ron Rosenblith of Pottery on the Hill said he scoured Capital Hill for an appropriate business setting and chose 8th Street because of the spirit of camaraderie the merchants had. "We all try to help each other out," he said. "When Larry's Patio Cafe got started in January, they were tight on operating money. Larry's landlord came to me and suggested I let him have $50 worth of pots in exchange for $50 credit at Larry's. Meanwhile, he would deduct $50 from Larry's rent."

Other proprietors have been on the cutting edge of attempts to put a prettier face on 8th Street. When Ship's Cafe lost its lease in the 700 block, the proprietor looked for a site in the 500 block. Barracks Row Associates, feeling Ship's Cafe had been a gathering place for the worst elements of 8th Streets unsavoury street life, opposed the move by fighting the liquor license.

"We won the first round," said Barbara Thomas, "but they appealed and made it into a racial issue, which it wasn't." Ship's Cafe is now Ben's Hide-A-Way but the neighboring shopkeeper's agree that Ship's Cafe incarnate has, as Thomas herself put it, "cleaned up its act." Some of the other infamous bars and liquor stores have been replaced by such boutiques as the Clip Joint, a dog grooming shop.

Some of the nightspots have taken to working closely with Barracks Row. "When Club Madame was going to paint it's store front, they came to us and we talked about what color would look best," said Thomas.

There are those who feel, as Emanuel Martin of City Wide Groceries does, that small black businesses and poor black clientele are gradually being forced off the street, due not to prejudice so much as the bare facts of economic life.